This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, click the "Reprints" link at the bottom of any article.

In the study, researchers examined eastern grey squirrels (Sciurus carolinenesis), called “successful urban exploiters” by the authors, foraging on the grounds of an apartment project in lower Manhattan that was dissected with footpaths and well stocked with the grey rodents. The observers were told to walk towards and by foraging squirrels in such a way as to remain two meters from the critters when they passed. They did so using two variants of this approach.

The first variant required the observers to stay on the footpath and thus only approach squirrels within range of the footpath. Half the time the observers were instructed to avert their eyes and half the time they were told to look at the squirrels. The second variant involved the observers leaving the footpath and approaching the squirrels directly with the same split between looking at the varmints and averting their eyes. The observers then recorded what proportion of squirrels fled before they reached the two-meters-away point.

The results aren't really surprising. Squirrels have intuitive “radar” of sorts that alerts them to potential danger and bids them flee when the danger is deemed too great. Generally speaking, squirrels stayed put when the observers stayed on the footpath, but fled readily when the observers went out of their way to approach the squirrels off the footpath.

In both cases the squirrels flee a lot more often when you’re looking at them, which is the only part of the study that's all that interesting. It shows that squirrels can tell when people are looking at them.

The study also measured three things in each of the four treatments: the distance at which the squirrels sit up and take notice; the distance from the observers at which the squirrels begin to flee; and the distance that the squirrels ran before starting to forage again.

The key results follow.

When the observers didn't look at the squirrels and stayed on the path, the squirrels stayed put, being used to humans. Their radar didn't kick in.

When the observers looked at the rodents but stayed on the footpath, the squirrels became alert when the observers reached about five meters away, but they didn't run away, probably because people in the apartment complex generally stay on the footpaths. They were alert to potential danger but didn't flee.

When the observers left the path but averted their gaze, the squirrels got alert from about eight meters out, but they didn't flee. The squirrels were concerned a bit—people generally stay on the paths—but they didn't scram. The presence of people is a normal thing for them.

But when the observers left the path and stared at the squirrels, squirrel radar puts them on high alert. The critters get alert from about seven meters away and flee shortly thereafter; they tend to run about six meters away before again going about their business.

Ready to Bolt

The key point is that it makes a big difference whether or not people are looking at the squirrels, although staying on the footpaths also keeps them calmer. In truly dreadful scientific prose that tries desperately to sound authoritative, the researchers conclude as follows:

“We have identified cues that are likely to be important for risk perception by an urban animal species monitoring its environment. Together with direction of attention of people, urban squirrels were more reactive to pedestrians that showed a divergence from ‘usual’ behaviour (e.g. pedestrians entering areas which are usually human-free), even when not associated with closer approach or changes in speed. In addition to being arboreal (which can include use of anthropogenic structures), which minimizes vulnerability to diurnal terrestrial ‘predators’ (see Herr, Schley & Roper, 2009), general trophic and social flexibility (Baumgartner, 1943; Don, 1983; Koprowski, 2005) may help explain why eastern grey squirrels are successful urban adapters.”

What they mean is that squirrels pay attention to unusual human behavior and eye contact. When they see them, they bolt.

These squirrels are a pretty good metaphor for us, but perhaps not in the way we might expect. Squirrels, like humans, are highly risk averse. We humans feel a loss two to two-and-a-half times more strongly than we feel a comparable gain. In the wild, that makes perfect sense. If the squirrels run away too readily, they may lose a nut or two, but little else. But if the varmint sticks around too long, it can get eaten by a predator. That's a loss that is permanent and unrecoverable.

We are remarkably like squirrels. If markets are behaving as we expect, we’re fine. When they deviate from what we expect, we get concerned and pay special attention, ready to flee. And when we spend too much time looking head-on at what's going on (as when the squirrels’ and the observers’ eyes meet in sweet communion)—perhaps checking our accounts online every day or, heaven forbid, watching one of the “business” channels, we tend to trade (read “bail”) far too often.

The research bears this tendency out. And, sadly, the professionals tend to flee as readily as their clients. The metaphor is a bit mixed, but if we have a good plan in place (a crucial “if”) and when the markets are wild, we’d be wise to “avert our eyes” and stay calm.

In the investment world, being too skittish—bailing out of the markets too readily—is generally much more dangerous to our success than holding on too long, especially when the applicable time horizon is a relatively long one. Staying the course through tough times requires that we deal with immediate pain for far-off gain, which is always very difficult for us. That makes this sort of situation that much tougher.

Peanut Peril

In the financial services business, we spend a lot of time dealing with complex products and strategies. And there's good reason for that. But the heart of good retirement planning—good financial planning—is simple (if hard to do). It's informed common sense. It begins with starting early and saving aggressively. Then when the markets get ugly, as inevitably happens, it requires that we manage our internal radar to good effect.

This requires courage, the ability to do the hard, right thing even when we’re afraid. The best retirement income strategy in the world is utterly meaningless unless and until one has the resources to put it into place and make it work.

From 1928 through 2013, using the three-month U.S. Treasury bill as our risk-free surrogate, risk-free money has returned 3.53% annualized as compared with 9.55% annualized for stocks, using the S&P 500 Index as our stock surrogate. Put another way, $100 invested risk-free over that period would have grown to only $1,972.72 while $100 invested in stocks would have grown to $255,553.31. A diversified stock portfolio would have done even better. Obviously, $255,000 is a lot more money than $2,000.

In other words, if we deal with risk like squirrels (and it can be hard to avoid; I don't want to minimize that reality), we can be left trying to live on peanuts.